Since the warnings about the coronavirus, a virulent virus rapidly spreading across the globe emerged, the real estate industry has been tasked with finding a way to prioritize public health while continuing to help clients buy and sell properties. Ten days ago Alameda County deemed real estate agents as essential workers under the shelter in place order. There has been significant effort at the local and National level to interpret the restrictions agents, buyers, and sellers must adhere to. The rules of engagement have been changing on a nearly daily basis but as of now, this is what we understand:
Real estate transactions are continuing under the current Shelter In Place (SIP) order. At the time of this writing and since the SIP went into effect on March 17th, over 300 homes have come on the market in Alameda County, and of those, over 27% are already pending or sold.
When feasible, all viewings must be limited to virtual tours and home photography. There are a few ways this can be handled. 3D Matterport tours allow a detailed, dimensional virtual walkthrough and also have floor plans to enable a comprehensive understanding of the layout and physical space. Some agents are hosting virtual open houses on Facebook or Instagram Live. Viewers can join and ask questions about the house layout, condition, and request to see specific areas. Vacant homes can be shown if the seller, buyer, and agent sign a new disclosure form called the Coronavirus Property Entry Advisory and Declaration (PEAD) form. Vacant homes are defined by Contra Costa, Alameda County, and the city of Berkeley as “the property is not occupied or used as a place to live and there is no intent to use it prior to the close of the transaction.” Going on vacation or leaving during the showing does not classify as a vacant home. Many listing agents are justifiably requiring a comprehensive review of the disclosure package, virtual tour, and a physical drive-by of the property prior to making a physical showing appointment. Any in-person showings are limited to one real estate agent and no more than two people from the same household while maintaining physical distancing practices and observing all CDC guidelines.
The SIP order stipulates if more stringent city regulations exist, the stricter of the two must be adhered to. Home stagers, painters, and landscapers are not considered essential. While this means no new staging can be placed in a home if it came on the market after March 16, 2020, virtual staging companies offer a unique solution to this restriction. It is important to note that virtual staging may alter your impression of how large or how small a space is. It is important to refer to floor plans with measurements, in concert with virtual staging, to get an accurate sense of the scale of each room.
In the Bay Area, over the past 10 years, we have been experiencing a seller’s market where contingencies were a thing of the past. The majority of prevailing offers waived all contingencies. Under the new circumstances with the coronavirus, this has changed. The economic standstill brought on by this health crisis has swelled the tide of unemployment. Some experts predict we may cross 20% unemployment in the next few months. This means jobs are uncertain and loans that were previously available may not be tomorrow. It is essential to have contingencies to cover you in case of unforeseen changes in employment or the ability to qualify for a loan. Additionally, since showings are limited to virtual only whenever feasible, inspection contingencies are something you may want to include in the contract. Speak to a qualified real estate agent who can effectively advise you on the risks and benefits.
- Close of escrow and timelines
We have become accustomed to incredibly short escrow periods, ranging from 10 days for all cash offers to 21 days for financed offers. Now that many workers at financial institutions, escrow and title companies, and real estate appraisers, are under strict SIP orders, the turn times will be significantly extended. This is especially important to recognize and communicate if you are attempting to purchase a house at the same time you are selling. It’s vital that you have both agents work together to keep the closing timelines coordinated and on track.
Appraisals have largely moved to “desktop appraisals” to comply with SIP orders and to maintain the health and safety of all. This method relies on using comparables analysis from recent sales listed in the local MLS (multiple listing service) as well as a drive-by of the property. I always meet an appraiser in person with comparable sales to defend the offer price my clients have selected. Make sure your agent asks your lender to have the appraiser contact them before they complete their appraisal review. We have many wonderful and very experienced local appraisers but your agent may know about recent pending sales that are not yet publicly available.
Real estate continues to be a vital part of the economy and a large source of important city revenue generation via transfer taxes. Buyers and sellers will continue to need to transfer real property. With uncertainty about how long the shelter in place orders will last, and regional extensions of the SIP, it is our job as agents, to think outside of the box while staying within the rules. Each city, state, and local realtor association is continuing to issue regular guidance updates. For information on how to navigate the complexities, reach out to a trusted real estate advisor.